According to a recent report by The Wall Street Journal, U.S. technology firms are exploring the possibility of their Chinese AI manufacturing partners establishing operations in Mexico. This strategic move has piqued the interest of major players like Foxconn, potentially bringing manufacturing closer to American tech companies. The United States-Mexico-Canada (USMCA) free trade agreement, effective since 2020, is set to bolster Mexico’s expansion efforts.
This trend, known as nearshoring, has seen Mexico emerge as a key beneficiary of tech manufacturing investments post-USMCA. The shift of manufacturers from Asia to USMCA member countries exemplifies this trend. Foxconn, as per WSJ sources, is currently producing AI devices in its expansive Mexican facilities for tech giants such as Amazon, Google, Microsoft, and Nvidia. (Confirmation from the companies regarding Foxconn’s server operations in Mexico remains undisclosed.)
Moreover, insights from an Inventec executive based in Taiwan shared with WSJ indicate the company’s plans to establish manufacturing operations in Mexico. Inventec counts a prominent “leading American company involved in AI development” among its clientele.
In a move away from China, Dell and HPE are reportedly diversifying their manufacturing bases towards Southeast Asia and Mexico. Notable Asian companies like Pegatron, Wistron, Quanta, and Compal are also making inroads in Mexico. Current statistics reveal the presence of 300 Taiwanese enterprises in Mexico, collectively employing 70,000 individuals and fostering trade exceeding $15 billion.
While Mexico faces challenges like wage competition and potential utility disruptions as a manufacturing hub, factors such as USMCA provisions, its proximity to the U.S., and recent political dynamics favoring the nation position it as a compelling alternative to China, historically known as the global electronics manufacturing hub.
Presently, China encounters obstacles in AI server production due to U.S. trade restrictions, impeding its access to cutting-edge chips crucial for serving American tech firms. Notably, advanced Nvidia GPUs, including the GeForce RTX 4090, are among the products restricted from export to China.
The strained U.S.-China relations reflect a decline in Chinese imports to the U.S., accounting for 13.9% of total imports last year, down from 21.5% in 2015, as per Census Bureau data.
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Recent data from Taiwan’s Ministry of Economic Affairs (MOEA) reveals Taiwan’s dominance in AI server production, constituting 90% of global output and 100% of U.S.-branded AI servers. This revelation raises concerns about Taiwan’s geopolitical vulnerability in the foreseeable future.
